The rapid depletion of stocks and the apparent supply cuts from Moscow have the characteristics of a new energy crisis for the , which has already begun, according to Bloomberg. In particular, gas prices in Europe have increased by about 45% this year and the escalation of tensions in Ukraine has contributed to this. Although levels are still much lower than the 2022 records, they are high enough to risk deepening the cost of living crisis for households and intensifying competitive pressure on strained manufacturers. Natural gas storage is a lifeline during the colder periods, but stocks this year are rapidly declining, since cold temperatures increased demand for heating and rising drought required greater use for electricity generation. Over two years after President Vladimir Putin put energy as a weapon, Europe struggles to secure its energy system. The narrowness of the market reflects the continent’s challenge of being fully independent of Russian fossil fuels. The situation is going to get worse, as deliveries of natural gas that contributed to stockpiling in 2024 may not be available next year, expanding price depression. “We still have problems with gas supply,” said Marcus Krebber, CEO of RWE, at a conference last Friday (22.11.24). “If we really want to be independent of Russian gas, we need to have greater import capacity and this will probably be seen this winter, because the gas storage facilities are emptying quite quickly, as we have a cold winter start.” Russia’s war with Ukraine escalates, with both sides launching missile attacks this week in an attempt to gain advantage in view of Donald Trump’s return to the White House. As a result of increasing tensions, the US imposed sanctions on Gazprombank, the last major financial institution to be exempted from sanctions and manages payments for Russian gas. Penalties aim to reduce the Kremlin’s revenue from energy exports, but also increase the risk of stopping gas still flowing in the Central European States Although Europe has reduced its dependence on Russia, the loss of one of the last remaining routes for gas through pipelines would put greater pressure on the gas market and launch global prices as high as possible, according to Energy Aspects analysts. Europe is already preparing to stop Russian gas flows through Ukraine when the transit agreement ends at the end of the year. Sanctions mean that the gas flow could stop before that, with Hungary warning that its energy security is threatened. Prices reflect the possible loss of part of the remaining cheap Russian flows, delays in the additional supply of liquefied gas from the US and a cold winter. In another unusual sign of pressure in the system, prices for summer, when natural gas is supposed to be cheap enough to make up for storage, are more expensive than next winter. This suggests that energy costs will remain higher for a longer period, and the lower the storage levels this winter, the more difficult the work of replenishing stocks becomes. At the peak of the energy crisis in 2022, Germany ordered mandatory fast gas markets to store from the world market at record prices. To try to recover some of the extra costs, Berlin introduced a gas storage fee, paid by traders or utilities for deliveries through Germany. The measure has been heavily criticised, as it increases the cost of obtaining liquefied natural gas for countries that do not have land borders, such as Austria, Slovakia and the Czech Republic. “This begins to look like the 2022 scenario, in which the EU was buying gas at any price,” said Arne Lohmann Rasmussen, Global Risk Management’s chief analyst in Copenhagen. “Next year, this could possibly happen during a year with strong demand in Asia”. Fatih Birol, executive director of the International Energy Agency, is ringing the alarm. He warned that Europe needs ample reserves for later this winter, if the transit of Russian gas through Ukraine stops on 1 January with the end of the agreement between Moscow and Kiev. In Germany, where many factories were forced to stop or reduce production due to high energy costs, the faster withdrawal of stocks sends alarming signals that pressure on Europe’s largest economy could continue for a third consecutive year. “Once again, energy-intensive economies, led by Germany, will suffer more, hitting an economy already troubled by problems in the areas of cars, chemicals and machinery,” said Ole Hansen, head of the Saxon Bank AS freight strategy. Germany is at a standstill after the energy crisis and an increase in inflation could increase voters’ frustration in the light of the early February elections. In the winter of 2022, Europe avoided deficiencies partly thanks to a mild winter. This year, the risks of energy reports are low. Higher prices compared to Asia mean that loads of liquefied natural gas are arriving. But a cold winter elsewhere could create greater competition for supplies and further raise prices, which would cause problems in the area. “There is an increased risk that Europe’s luck, in terms of mild weather, will run out in the coming winter,” said Hansen of Saxo Bank. “We are in other words forced to rely on imports of liquefied natural gas and together with this need to remain competitive with Asia.”
What causes the rise in gas prices in Europe
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